Outlook bleak for real estate sector

A view of Trung Hoa - Nhan Chinh Urban Zone in Ha Noi. The property market is forecast to continue enountering difficulties for the rest of the year. —VNS Photo Truong Vi

HA NOI (VNS)— The Vietnamese property market is expected to continue struggling for the rest of 2013, with hopes of a quick rebound looking increasingly unlikely.

Experts at a conference organised by the Viet Nam Investment Review newspaper yesterday urged a re-evaluation of the current market, so that the root causes of the continuing slump could be fully uncovered and an appropriate clear-cut solution found.

Authorities had expected that a Government support package worth VND30 trillion (US$1.43 billion), offering preferential loans to enterprises and low-income families to purchase a house, would help unfreeze the real estate market.

The director of the State Bank of Viet Nam's Credit Department, Nguyen Viet Manh, told the conference that the support package and an attached circular offering guidance would be finally issued next week after final consultation on Wednesday with the Ministry of Construction.

However, many experts and real estate developers have raised their concerns about the package.

According to Nguyen Tri Hieu, member of OceanBank Board of Directors, the proposed interest rate of 6 per cent offered to home buyers for three years was not reasonable.

He estimated 90 per cent of low-income earners must seek loans to buy a house of around VND600 million ($28,500).

He suggested that a more effective policy would be to lower the interest rate to 5 per cent and keep it stable for around 20 years to encourage buyers, citing that in the US, the rate was only 3.37 per cent and the term was up to 30 years.

Pham Truong Son, chairman of HUD 3 Investment and Construction Joint Stock Company, commented that the package was only focused on providing support for interest rates but interest expenses accounted for less than 10 per cent of a project's total capital.

Buyers waiting for further price cuts, which are widely predicted due to enterprises failing to sell their apartments, would cause huge damage to the economy, said Le Quoc Chinh, sale manager of an apartment complex project supported by South Korean investors.

He urged clear and consistent policies from the Government to raise consumer and developer confidence in the property market.

Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said that measures to clear high inventories in medium and high-priced apartments were needed.

Support necessary

Experts at the conference agreed that the real estate market needed support from the Government to get back on the right track. They stressed two key problems to be tackled: non-performing loans and a low supply of affordable social housing.

According to Hieu, the real estate market might hit rock bottom at the end of this year, and stay there for up to three years. He said he did not expect the market to recover soon unless bad debts were resolved imminently.

Developers should not be allowed to mobilise capitals from buyers, Hieu argued, pointing out that contributors were reluctant to enter the market due to fears about the lack of regulations controlling how investors use money.

Vo Dai Luoc, former director of the Institute of World Economics and Politics, said that mechanisms to ensure the market's healthy performance were critical to prevent the bubbles, ensure balanced supply and demand and stop speculation.

He added that transparency of the support package must be enhanced to ensure no party would be influenced by self-interest.

Vu Xuan Thien, Deputy Director of the Real Estate Market and Housing Management under the Ministry of Construction, said his department has asked localities to check real estate projects, report inventories and halt developments that are infeasible.

Nguyen Mai, former Deputy Chairman of the State Committee for Co-operation and Investment, urged the Government to introduce long-term solutions.

Regarding forecasts of the real estate market recovery, Cushman&Wakefield said that there was "no quick fix" solution because confidence remained weak and would take time to recover. — VNS